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🛢️ Audit the Strategic Petroleum Reserve?
Shale Costs Slide but Timing Couldn’t Be Worse

Good morning; here's what the Oilman has for you today:
GOP Legislators Call for SPR Audit
Shale Costs Slide but Timing Couldn’t Be Worse
Tweet of the Day

GOP Legislators Call for SPR Audit
A Republican committee chair and a Senator have called for an audit of the strategic petroleum reserve in the wake of the massive 200-million-barrel draw the Biden administration made last year.
Rep. Cathy McMorris Rodgers and Sen. John Barasso are claiming SPR mismanagement and a threat to national security.
The most massive inventory drawdown in history may have consequences
Last year, the Biden admin released 180 million barrels from the SPR to reduce prices at the pump.
Then it released another 20 million barrels to try and push international oil prices lower.
The result is that the SPR currently holds 372 million barrels of crude versus 638 million barrels at the start of 2021.

The two GOP legislators are warning the massive draw could have damaged the reserve’s storage system physically.
Pumping out almost half of that system’s contents is a serious change in the status quo.
The Department of Energy says there is no problem, and it’s all being monitored.
The DoE also keeps saying it would start buying oil to replenish the SPR.
We’re seeing a lot of “Talking the Walk”, but now a whole lot of “Walking the Talk”.
There’s a reason it is called strategic
There’s an argument that the SPR is obsolete and nobody needs to keep hundreds of millions of barrels in reserve just in case.
Those making that argument clearly have no knowledge of the 1970s Arab oil embargo.
Or the fact that the U.S. consumes more than 20 million barrels of crude every single day.
Must be our falling educational standards.
Those who do know about oil history know that a strategic reserve has a reason to be called strategic.
They also know why the SPR was created at all: the Arab oil embargo.
Another thing some of us know is that history tends to repeat itself. And it’s never pretty.

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Shale Costs Slide but Timing Couldn’t Be Worse
Shale drilling costs are beginning to soften, but the softening is coming at a bad time, with the oil demand outlook cloudy.
At the same time, oilfield service providers are holding their own, threatening to idle equipment rather than cut prices.
Good times don’t last forever
And the oil industry knows it.
Last year, everyone made money amid the price rally.
Now, everyone is being cautious as prices drop and forecasts for demand are tied to forecasts of GDP growth – which are not massively upbeat.
Cautious means drilling less, and drilling less means less demand for things like rigs, tubing, frac sand, and workers.
Result: lower steel pipe and frac crew prices. Shocking.
And here’s the bad part: few would try to take advantage of the lower costs.
All because of that demand uncertainty that’s infected the industry.
No more “Drill, baby, drill”
Have you read the comments section in the latest Dallas Fed Energy Survey?
Here’s a taste: “The public narrative, directed by Washington, that the world is moving away from oil and gas is a very big problem. It's easier to finance a vape shop or a tattoo shop than it is to finance oil and gas. There is something seriously wrong here.”

There sure is something seriously wrong here.
If it’s become so difficult to get financing for oil and gas projects, and if you constantly get fingers pointed at you for destroying the planet, how motivated would you be to boost your production?
Yeah, not very. Until prices rebound (which they always do).
That’s the beauty of the oil industry…whatever Washington narrative pushers try to sell you.

Around the Global Patch
🇦🇺 Australia's quest for global green hydrogen dominance.
🇨🇦 Oil companies shut down operations to aid Alberta's wildfire relief.
🇷🇺 Russia's crude oil exports reach new highs in early 2023.

Tweet of the Day
China emits more greenhouse gases THAN THE ENTIRE DEVELOPED WORLD COMBINED. #China#ClimateEmergency
— 🇺🇸 Kyle Bass 🇹🇼 (@Jkylebass)
2:14 AM • May 10, 2023

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